Shares of Habit Restaurants (HABT) were soaring today after the fast-casual burger chain agreed to be acquired by Yum! Brands (YUM 0.69%), the parent of KFC, Taco Bell, and Pizza Hut. Yum! will take over Habit for $375 million, or the equivalent of $14 a share, a 33.2% premium above Friday's closing price at $10.51.
As of 12:36 p.m. EST, Habit shares were trading up 32.5% at $13.92, indicating a strong level of confidence that the deal will go through as negotiated. Yum! shares were essentially unchanged, down 0.3% at that time, as Habit is too small a company to move the needle on the fast-food giant at this point.
The acquisition of Habit comes a little more than five years after the burger chain debuted on the public markets. Its run has been mostly disappointing, as the stock sold for $18 in Nov. 2014 and surged to over $40 out of the gate. However, the company struggled to supply consistent comparable sales growth and meaningful profits in a highly competitive market, especially as the rise of third-party delivery apps has put pressure on a number of restaurant stocks. More recently, Habit has made progress by embracing digital ordering, third-party delivery, and drive-thrus. Additionally, the company makes its burgers to order, unlike traditional fast-food chains, and they consistently receive high ratings as well as a number of accolades. That reputation for quality would seem to give it value for a franchisor like Yum! that does not currently own a burger concept.
Commenting on the deal, Yum! CEO David Gibbs said, "As a fast-casual concept with strong unit economics, The Habit Burger Grill is a fantastic addition to the Yum! family and has significant untapped growth potential in the U.S. and internationally."
Habit CEO Russ Bendel added, "We're confident the agreement delivers immediate value to The Habit Burger Grill shareholders and will greatly benefit our beloved brand, team members, franchisees and loyal guests for many years to come."
The fast-food industry has seen significant consolidation in recent years with brands like Sonic and Panera being taken private, so today's announcement doesn't come as a huge surprise, especially given Habit's struggles. The deal is expected to close by the end of the second quarter of this year. Expect Habit shares to hover near the $14 mark until then.